The behavior of stock prices in the GCC markets

Abstract EN

The paper examines the behavior of stock prices in four GCC markets: Bahrain, Kuwait, Oman and Saudi Arabia.

The data consists of weekly stock price indexes from September 1994 to April 1998.

Three tests of the weak form of the efficient market hypothesis are applied.

The first two, unit root and variance ratio, test the hypothesis that price indexes follow a random walk; and the third, regression, tests for autocorrelation of returns.

In the case of the Kuwaiti market, the results strongly support weak form of efficiency.

As to the other three markets, only one of the tests (regression of returns) rejects the weak form of the EMH when the total period is considered.

However, when the sample is split into two, the efficiency hypothesis is not rejected for the second subperiod in two of the markets and only by a small margin in the case of the Saudi Arabian market